BackPMI: Private sector growth at near-decade high, but no good news on employment
Composite PMI Output Index rose to 59.2 in November from 58.7 in October, the strongest upturn since January 2012
PremiumBusiness activity in India's manufacturing and services sectors continues to recover with the gradual reopening of the economy and rising pace of vaccinations. The latest Purchasing Managers' Index (PMI) survey published by IHS Markit showed that the seasonally adjusted India Services Business Activity Index stood at 58.1 in November, a marginal decline from 58.4 in October.
A reading above 50 indicates expansion and below the threshold points to contraction.
Investors would reckon that manufacturing PMI for November published on 1 November also pointed to a robust recovery. The combined improvement in both these sectors has resulted in the Composite PMI Output Index rising to 59.2 in November from 58.7 in October. The survey report said that this is strongest upturn in the Composite PMI since January 2012. "Aggregate new business rose for the fourth month in succession and at the fastest pace in almost ten years. The pick-up in growth stemmed from the manufacturing industry, as sales among service providers increased at a pace that was little changed from October," said the PMI survey report.
Private companies operating in both the sectors continue to tackle input cost inflation by raising prices gradually. Since companies are yet to pass on the entire burden of cost pressures, inflation remains a concern and continues to weigh on their business confidence.
Another pain point remains the muted employment trends despite the headline indices showcasing revival. According to the survey report, on a combined basis, the private sector employment increased only slightly in November.
And unfortunately, the outlook on this front is bleak.
Economists at DBS Bank caution that the after-effects of the pandemic on the labour markets and incomes are likely to be felt for longer than the revival in other cyclical economic activity. “Improvement in hiring has also been lop-sided, as few cyclical sectors fare better than the rest e.g., ITES/computer software sectors. Elsewhere, with more than two-thirds of the work force comprising of the self-employed and casual labour, dependence on regular employment (as most are without social/protection benefits) is high," the Singapore-based bank said in a report on 2 December. Further, the report highlights that even though unemployment rate has fallen to pre-Covid levels, total employed is below January 2020 levels, with urban faring a shade better than rural.
While this problem is not unique to India, peers and emerging and developed nations are yet to see a meaningful improvement in employment data.
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